Boomer offspring growing sick of Labor’s taxes

Our current national political leadership void is reminiscent of the early 1970s, when prime minister John Gorton and his chaotic administration were dethroned in office by Billy McMahon. While McMahon inspired little other than ridicule, what really sank the Coalition at that time was a failure to understand economic and demographic change in Australia, driven by the coming of age of the bolshie baby boomers.

Gough Whitlam
had his version of a plan. It was a bit crazy economically but it was still a plan and it worked for a little while. Now the boomers are retiring and their better qualified, economic dry but socially liberal kids are taking the political centre stage.

This time it’s the Labor Party that doesn’t know how to handle them and is now living off the votes of downwardly mobile families, who are living off the government. Fortunately for Labor,
John Howard
left a lot of these around in Adelaide and Melbourne. But it didn’t end well for Howard and it won’t end well for
Julia Gillard
.

The Greens have a plan. Like Gough’s, it’s a bit crazy on the economics and pretty much the same: tax and spend. The Tories under
Tony Abbott
, on the other hand, think they can win by being economic wets and social conservatives. This worked for Howard on the bolshie boomers but it’s the exact opposite of what’s required to get their kids’ vote.

The changing demographics for two key economic industries, manufacturing and professional consultants, illustrate this. The former was the biggest industry of choice for blue-collar boomers, while the latter is the industry of choice for their precious kids. In 1994, manufacturing was Australia’s largest industry group, with 1,071,700 workers. They voted Labor overwhelmingly. Only 438,800 were professional consultants and they voted Liberal overwhelmingly. In the middle were swinging voters, the young marrieds, who determined which side won the election. In 1996 Howard outbid Labor among disenchanted welfare recipients and the poorly paid blue-collar workers. Labor’s support from the manufacturing sector fell only marginally but it was enough for Labor’s rusty campaign machine to lose some ineffectual MPs to high-profile Liberals and give Howard his working majority.

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Howard couldn’t afford his cherished income-splitting to lock up this new Liberal constituency but he could throw a bucket-load of taxpayer revenue into family tax A and B, which encouraged low-income families to stay in crummy jobs in rust-belt suburbs in northern Adelaide, western Melbourne or northern Tasmania, rather than move to areas where they could find better jobs. Thus the Howard battler demographic was born.

The professionals couldn’t stand Howard’s more conservative social policies and weren’t fussed about paying for his welfare reforms, either. When the economy picked up and Howard told his hitherto loyal battlers they had to transition from welfare to work, they told him to transition to opposition. Battler seats – especially in Queensland – went to that nice Mr Rudd.

Howard’s policies to prop up his blue-collar vote and Treasurer
Wayne Swan
’s failure to reform any of the Howard government’s family tax packages, and his wimping out on Ken Henry’s tax reform package, have had an economic cost.

Manufacturing employment has dropped, in absolute terms, to just under a million workers. It is now the fourth biggest industry sector after health, retail and construction. Professional consulting has almost doubled in size to 855,800 and will eventually overtake manufacturing.

Average weekly earnings for professional consultants have grown by 214 per cent, but manufacturing pay cheques have grown by only 180 per cent. As wages have increased in professional consulting since 1994, jobs have increased as new workers are sucked into that industry (and mining).

Whenever wages have increased in manufacturing, jobs have decreased. One person’s pay rise has been another’s job. Manufacturing workers are among the most heavily reliant on family tax benefits and professional consultants are the least. Since the Howard changes, the family tax package has become another form of political and economic industry protection for the unionised, lower paid and award-based industries (transport, manufacturing and construction and females in retail and hospitality). It has locked families into crummy jobs instead of encouraging a shift to the high-growth mining sectors in Western Australia and Queensland.

On the other hand, high socio-economic status workers in professional consulting, finance, media, education, arts and recreation, health, real estate and hospitality take their chances in the real economy. They share in the deal, however, in that they are paying for it – to the tune of about $23 billion a year in income tax.

At the 2010 federal poll, these manufacturing workers voted strongly pro-Labor. And there’s absolutely no chance of Australia’s weakest leadership team since McMahon changing any of it. Not when you start to work out which Labor-affiliated unions all these workers belong to.

In the real economy, professional consultants, after preferences, voted about 50-50 Labor and Liberal and swung to neither major party after preferences. They couldn’t stand either of them.

In primary vote terms, however, professional consultants were the strongest supporters of the Greens. We estimate that about 40 per cent of the professional consultant industry group voted No. 1 for a Liberal and 40 per cent for a Green, with Labor only dragged back to respectability by Green preferences.

These Green preferences from a large, fast-growing and well-paid group, which gains precisely zip from the commonwealth’s largesse and pork-barrelling of its favourite industries and its affiliated unions, hides a huge hole in Labor’s current demographic base.

This is the context of their resentment at being slugged for a new flood recovery tax – again means-tested to avoid any political pain for Labor’s base voters. They are sick of paying for everything the commonwealth does and getting precious little for it. Unlike boomer-era mums and dads, they have no loyalty to any political party.

It makes a lot more sense for the Liberals to seek to win a majority of seats with the aid of these professional voters who have already moved from Labor to Greens, in the same way they eventually picked up middle-class Catholics who had deserted Labor for the DLP. These professionals might not have liked John Howard but they regard Julia Gillard as Billy McMahon in a sailor suit.